Holiday Budgeting Tips

Holiday Budgeting Tips  

With the holiday season fast approaching we are bound to hear much about holiday spending. Holiday spending can put a dint into the most prudent of consumers. From gifts, food, drinks, decorations, wrapping, new holiday wear and road trips to see family the list of expenses can seem endless. Spend too much and you could suffer from a spending hangover, in the form of debt, that will last months or maybe even years.

On average we spend about $1,800 each during the holidays and 78 per cent of Canadians plan to cover that cost using credit cards. On average it takes a family six months to clear credit card debt accrued during Christmas. So how best to plan for the upcoming holiday season? Budget. And not just any budget, a budget based on your OWN unique needs, fixed expenses, debt repayment, child care expenses and variable expenses. 

Here to help you with your holiday budget, we at Continuum II have put together a list of tips to help you prepare for seasonal spending. In applying these tips to your financial plan this holiday season you could increase savings, repay and reduce debt, prevent impulse spending, distinguish between a need and a want, and identify expenses that can be reduced.

Note: What everyone can spend on gifts during the holidays is different, so building a unique budget to your own lifestyle is key. 

Tip 1. Make a list of all the people you wish to give a gift to. Divide that list into 3, your primary relationships, secondary and service providers. Then allocate a dollar amount, base on your budget, to each person.

Tip 2. Now that you know how much you can afford to spend on gifts, why not pre-fund your gift budget? The best way to plan for gifts is to set up a sinking fund-that is a special bank account to which you contribute monthly the preset % of your income you can afford and wish to devote to gifts.

Tip 3. Remember, gift giving is not a competitive sport. If your budget is tight, you may wish to provide some on your list with a hand written card, or a unique tree ornament. 

Tip 4. Setting and discussing spending limits with family members, beforehand, provides everyone with the opportunity to weigh in and be clear about their own budgets

Fun tip: Try something different. Many families “draw” names and only buy for the person who’s name is drawn.  This way, each family member receives one nice gift.

Needless to say, going into debt to celebrate the holidays is a poor financial decision.  Best to put the charge cards away unless you are confident you can pay off the balance in full come January.

If you need more help building your holiday budget, call your Continuum II advisor today.

ORPP vs. DC RPP

The Ontario Retirement Pension Plan (ORPP) is a new government plan that is set to begin implementation January, 2017.   Designed to address the gaps in workplace pension coverage while providing a predictable source of retirement income for life, the ORPP aims to provide greater financial security for Ontario workers. More specifically, the ORPP will work towards supplementing those not covered by a Defined Contribution Registered Pension Plan (DC RPP) or a Defined Benefit Registered Pension Plan (DB RPP).  Participation in the ORPP will be mandatory for all employers and employees in Ontario, unless there is a "comparable" workplace plan already in place.

The following chart outlines the differences between the two types of pension plans. IF you don't already have an RPP we encourage you to take note of the benefits outlined below.

Definition of a comparable plan:

• Provides people with a predictable stream of income for life
• Provides people with security (they won't outlive their savings)
• Requires contributions form employers to ensure fairness
• Aims to replace up to 15% of a person's pre-retirement income

Comparable plans

• DB - must match or exceed the benefit being offered through the ORPP
• DB earning-based - must be at least 0.5% to be considered comparable
• DC - most have a minimum total contribution of 8% of base salary earnings, employers required to contribute at least 50% of the total minimum
• Hybrid plans - annual DB accrual rate of 0.5% plus annual DC contribution rate of 8% ≥ 1
• Flat-Dollar/Flat-Benefit plans - will be assessed for comparability by expressing the benefit rate as a percentage of earnings.

Group RRSPs and DPSPs are not comparable plans

Have questions?  Need more clarification just reach out to your Continuum II advisor today and let us help you find the optimal solution for your business. 

For more information you can also visit the Ontario.ca website